Download 2003 - Jan - Ch 8 - Health - IWK Health Centre

8
IWK HEALTH CENTRE
HEALTH
B A C K GROUND
8.1
The IWK Health Centre was created following a joint proposal to merge the IWK
Hospital for Children and the Grace Maternity Hospital. The Izaak Walton Killam
Health Centre Act was proclaimed in 1997 and amended in 2001.
8.2
The Health Centre is located in Halifax. It is a tertiary care facility that uses a
program-based model of care to serve women, children and families throughout
the Maritime provinces. There are approximately 5,000 babies delivered at the
IWK each year. Of nearly 72,000 patient days spent in the Health Centre in
2001-02, approximately 64,000 or 89% related to Nova Scotia patients, with the
remaining 11% related to out-of-province patients. The Health Centre employs
more than 2,400 staff and has 101 adult beds, 110 baby beds and 121 children’s
beds.
8.3
When the Province established District Health Authorities (DHAs) in 2001, the
IWK was given status as one of two Provincial Health Care Centres (PHCCs) under
the Health Authorities Act. The accountability relationship established by this Act
applies to the IWK Health Centre as well as DHAs. The other PHCC, the Queen
Elizabeth II Health Sciences Centre, is governed by the Board of the Capital District
Health Authority. The IWK is the only organization that does not come under the
authority of a DHA.
8.4
The IWK and the Capital District Health Authority signed an Affiliation Agreement
in June 2001. This is discussed further in paragraph 8.26 of this report.
8.5
The Health Centre’s revenues for 2001-02 were $118.3 million (2000-01: $110.6
million) and expenses totaled $117.4 million (2000-01: $108.5 million). The
Province’s grant to the Health Centre comprised $108.4 million of the $118.3
million in revenues in 2001-02. The IWK Foundation contributed $2.7 million
for capital equipment purchases and $6.1 million in specific purpose grants (use
of funds is restricted either by donor or Foundation) for total contributions to the
Health Centre in 2001-02 of $8.8 million. Historically the IWK Health Centre
has operated without a deficit. As at March 31, 2002, the accumulated balance
in the Health Centre’s operating fund was $0. The Health Centre’s expenditures
exceeded budget by approximately $3.2 million for 2002-03. The Department of
Health informed the IWK that DOH will provide funding to cover this amount.
8.6
Our last audit of the IWK was conducted in 1993, prior to the merger of the IWK
and the Grace Maternity Hospital, and involved the children’s facility only. The
financial statements of the Health Centre are audited by a public accounting firm.
IWK Health Centre
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R E S U LTS IN BRIEF
8.7
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The following are the principal observations from this audit.
The Health Centre uses the Carver model of Board governance. This model is
applied differently from other health facilities we have audited in the extent to
which decisions are delegated by the Board to management. For example, the
Health Centre CEO has the responsibility to approve the business plan whereas
in other organizations this responsibility would remain with the Board. The
Health Centre Board takes its responsibility for governance very seriously and
has established a framework that, although different from other organizations,
is strongly supported by governance literature.
The IWK Health Center has a well-established process for developing
the annual business plan and budget. Appropriate levels of management
contribute to this process. Cost savings initiatives are allocated to program
budgets. However, operational plans developed to achieve budget reductions
are not formally documented and the results of specific savings initiatives
are not tracked. Operational plans should be formally documented. Actual
savings from budget reductions should be monitored and corrective action
taken if savings are not realized.
The Health Centre’s expenditures exceeded budget by $3.2 million for 200203. The Department of Health has indicated it will provide funding to cover
this amount.
The Canadian Council on Health Services Accreditation (CCHSA) conducts an
accreditation review on all accredited health services organizations every three
years. The IWK Health Centre received an unqualified accreditation in 2002,
which is the highest level of accreditation. The CCHSA noted that the Centre’s
system for drug distribution results in a higher risk of medication errors than
in comparable facilities. We have recommended that the Centre investigate
the risks associated with this matter and consider whether it would be
appropriate to make changes on a more timely basis than is currently planned.
The IWK’s annual financial statements do not discuss the relationship between
the Health Centre and the Foundation. The IWK and the Foundation are
related parties and the IWK’s financial statements should disclose certain
information such as any transactions between the parties during the fiscal year.
The Health Centre continues to make progress in establishing systems to
monitor and report indicators of economy and efficiency such as lengths
of stay. We recommend that the Health Centre continue to work with
other facilities and organizations such as the Department of Health and the
Canadian Institute for Health Information to further develop targets, monitor
performance and make comparisons between facilities.
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A U D I T SCOPE
8.8
8.9
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The objectives of this assignment were to:
-
determine whether the IWK Health Centre has adequate planning and
monitoring processes;
-
determine the quality assurance systems and control procedures in place
relative to the quality of data submitted to CIHI;
-
review the Hospital’s audited financial statements and the results of
external and internal audits and the Canadian Council on Health Services
Accreditation’s most recent survey;
-
determine compliance of the procurement function with Government
Procurement Policy and whether accounting controls over pharmacy inventory
are adequate; and
-
determine if the IWK monitors whether certain resources are being utilized
with due regard for economy and efficiency, and whether systems provide
adequate information to support such monitoring.
Audit criteria were taken from recognized sources including Standards for Acute Care
Organizations - The Canadian Council on Health Services Accreditation, Financial
Management Capability Model - Office of the Auditor General of Canada and Treasury
Board Secretariat, Auditing of Efficiency - Office of the Auditor General of Canada
and the Nova Scotia Government Procurement Policy. Our audit included interviews with
management and staff, examination of documentation and review of external
auditor’s working paper files.
P R I N CIPAL FINDINGS
P l a n n ing and Monitoring
8.10
Background on governance - In 1998, one year after amalgamation, the Board
introduced, on a trial basis, the Carver model of Board governance (Boards That
Make A Difference, A New Design for Leadership in Nonprofit and Public Organizations, John
Carver). This model is used in many not-for-profit organizations, although other
organizations we have audited do not apply the model in the same way as the
Health Centre. Following the two-year introduction phase, the Board formally
accepted full implementation of this model. In applying the model, distinction
is made between Board and management responsibilities. The thrust is that
the Board shall govern, and through the President and CEO, direct the affairs of
the Health Centre. The Board focuses on policies and monitoring and does not
provide detailed direction in day-to-day management. The CEO and CFO are
formally charged with specific fiduciary responsibilities which set out their limits
of authority, responsibilities and formal reporting requirements. These individuals
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then organize the management structure and processes below them to ensure the
fiduciary responsibilities are satisfactorily completed and reported upon.
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8.11
The detailed governance policies are formal and clear. The Board relies on the
President and Chief Executive Officer (CEO) and the Chief Financial Officer to
provide formal reporting of progress in achieving various objectives and any
major risks impeding achievement of the established objectives. The IWK’s Board
of Directors Governance Policies include a policy on fiduciary responsibility which
states “The President and CEO shall not fail to establish and implement multi-year business plans
which support the establishment ends of the Health Centre and which is balanced within plus or minus
one percent revenues annually and do not exceed revenues within a 24 month cycle.”
8.12
The primary difference between governance at the Health Centre and other
organizations we have audited is the extent to which decisions are delegated
by the Board to management. For example, the Health Centre CEO has the
responsibility to approve the business plan whereas in other organizations this
responsibility would remain with the Board (see paragraph 8.14 below). The
Health Centre Board takes its responsibility for governance very seriously and
has established a framework that, although different from other organizations, is
strongly supported by governance literature.
8.13
The Board Affairs Committee is currently reviewing the information the Board
receives and the role of the Board versus the CEO to determine whether there are
any changes which should be made in the implementation of the Carver model.
Current plans are for this process to be completed by fall 2003.
8.14
Strategic planning process - The Board is required through the bylaws to develop
and review on a regular basis the mission, objectives and strategic plan of the
Health Centre. The CEO is responsible to assist the Board in establishing and
maintaining the overall strategic directions of the Health Centre, including the
business plan.
8.15
The process for preparation of the 2001-05 strategic plan was extensive and
included review of information on the health and health needs of children, youth
and women in the Maritimes and consultation with staff and patients of the
IWK, physicians, members of Community Health Boards and others. Four key
directions were selected. The Board reviewed the strategic plan and verified that
outcomes developed matched the Board’s overall goals.
8.16
An accountability framework was developed whereby staff are assigned
responsibility for projects and progress is reported bi-monthly to the project
coordinator. Senior management monitors overall progress and provides quarterly
reports to the Board. External updates are included in the IWK’s annual report,
community updates and other publications.
8.17
Linkage to business plan - The four key directions established in the strategic
plan are broken down into a number of goals which drive the business planning
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process. The Health Centre holds an orientation/information session in November
of each year for all staff with business planning responsibilities.
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8.18
In late fall, the Department of Health advises the IWK Health Centre of the
Department’s financial expectations. Generally, budget preparation is based on
maintaining a status quo budget and identifying cost drivers. New or expanded
programs are identified and prioritized and any initiatives approved by DOH are
included in the Health Center’s budget.
8.19
The IWK Health Centre follows a program-based model. Each program area
is comprised of several care teams such as Emergency, Special Care Nursery or
Childbirth. Each care team develops its own business or service plan based on best
practices and may request new or expanded programs. Service plans are reviewed
and challenged at the program level before final funding decisions are made.
8.20
The care teams’ service or business plans are consolidated to form a program
business plan. Each program director is responsible to ensure the accuracy of the
program area’s budget submission and reasonableness of assumptions included in
the plan.
8.21
The Health Centre business plan is developed from information in the program
business plans using a template provided by DOH. The budget control officer
uses the care team budgets but does not verify any formulas used by the care
teams in totaling budgets. There is no independent verification (e.g., by Internal
Audit) to ensure the mathematical accuracy of the budget submissions or the final,
summarized budget for the Health Centre.
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Recommendation 8.1
We recommend that the Health Centre institute a quality assurance process for the budget,
including an independent review by someone other than the preparer, such as the internal
auditor.
8.22
The Health Centre business plan is reviewed by senior management. Staff at
the IWK informed us that SMT (Senior Management Team) performs a detailed
review and challenge of the business plan and budget and SLT (Senior Leadership
Team) performs a higher level review and challenge. There is no documentation
of the two levels of senior management review and challenge. Although certain
high level, Health Centre-wide initiatives to reduce expenditures are noted, not
all decisions which impact program funding are formally documented. Health
Centre management stressed the importance of maintaining the confidentiality of
initiatives under consideration because of implications for individual staff. We
recognize the need to maintain confidentiality; however, we believe the Health
Centre should strive to document approved budget initiatives to ensure everyone
understands the action to be taken.
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Recommendation 8.2
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We recommend that the Health Centre strive to document all initiatives approved during the
review and challenge of the business plan and budget.
8.23
Following notification of the funding level from DOH, the Health Centre reviews
the total available funding as compared to the budget requests. Certain Health
Centre-wide targets such as maintaining staff vacancy rates are identified by senior
management. The available funding is allocated to the various program areas and
the programs are responsible for living within these budgets.
8.24
The Health Centre noted a lack of DOH or Executive Council approval or
disapproval of specific initiatives in the Centre’s business plan. Certain initiatives
may affect service delivery or staffing and the Health Centre may not know the
Province’s position until much later in the year. This lack of clarity impacts on
the IWK’s ability to prepare operational plans on a program basis. In our 2002
Annual Report (Chapter 8 - Accountability of District Health Authorities), we
noted that “accountability would be improved if DHA business plans were submitted to Executive
Council as provided in the [District Health Authorities] Act…and Executive Council formally approved,
with documentation, DHA planned initiatives in addition to the funding approval. This would help to
clarify the government’s performance expectations for the DHAs.”
8.25
Operational plans are a key component to living within the available budget
dollars. These plans detail how reductions will be achieved to ensure the
budgetary targets are met. During the business planning process for 2002-03,
the IWK identified a number of initiatives to help provide for a balanced budget.
These included maintaining a 1% staff vacancy rate, reducing education funding,
implementing an initiative with the Capital District Health Authority (CDHA) for
laundry services and other reductions within the various program areas for a total
of $3 million. Clinical service plans developed to support the original budget
request were not updated to reflect actual funding available. Staff at the IWK
informed us that there are plans on how to deal with budget shortfalls in program
areas but these plans are not formally documented. The IWK’s projected deficit
for 2002-03 was $3.2 million. After year end, DOH informed the Health Centre
that it would provide funding to cover this amount.
Recommendation 8.3
We recommend that operational plans be formal and written. This would ensure that staff
have plans in place to fully address any budget shortfall and provide better accountability for
funds.
8.26
128
Joint planning with CDHA - The Health Authorities Act requires that the IWK
and the Capital District Health Authority submit a joint business plan. “The Capital
District Health Authority, the Nova Scotia Hospital and the provincial health-care centres shall prepare
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and submit a joint health-services business plan…” (Section 69(1)) Management at the IWK
interpret this to mean that the Health Centre should collaborate with the Capital
District in planning as opposed to preparing a written joint plan. The Health
Centre has an Affiliation Agreement (signed June 2001) with the CDHA and
management believes it meets the requirements under the Act. This Agreement
deals with joint administrative initiatives such as shared services for laundry. The
Agreement refers to formal evaluations of any joint administrative initiatives as
well as annual reports. To date, there have not been any evaluations or annual
reports. Staff at the Health Centre informed us that they would provide this
information to the Department of Health if requested. The IWK and CDHA have
also implemented joint clinical initiatives in many areas such as MRI (magnetic
resonance imaging) and transition of patients reaching age 16 to adult care.
Clinical initiatives often originate with staff in these areas and are not necessarily
itemized in the business plans of the IWK or CDHA.
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Recommendation 8.4
We recommend that the Health Centre comply with the provisions of the Health Authorities
Act and the Affiliation Agreement relating to joint planning and shared services. Such services
should be formally reported upon and evaluated as required.
8.27
Capital budget process - The Health Centre appears to have a well-established
capital budgeting process. Capital requests are first prioritized at the program
level. The Capital Equipment Committee then reviews all capital requests and
prioritizes the requests Health Centre-wide. Once the available capital funding is
known, it is allocated to capital projects or purchases based on this prioritized list.
8.28
The IWK’s Health Services Business Plan submitted to DOH requested $23.3
million in capital funding for 2002-03. The Health Centre has a plan for the
redevelopment of the children’s portion of the facility over a five-year period,
at a total cost of $37.5 million. Part of the capital request to DOH for 200203 related to costs for the first year of this plan. The Health Centre has not
received any indication from DOH that they are willing to fund a portion of these
redevelopment costs. The IWK will not move forward with this project until
they have a funding commitment from the Department. The business plan also
indicates the Health Centre expects to receive an additional $5.6 million in capital
funding from other sources such as the Foundation.
8.29
The Department of Health no longer allocates funding between capital and
operating. DHAs and the IWK receive an operating grant and can decide to spend
a portion of this on capital if they choose. Although capital funding requests
are included in the Business Plan each year, DOH does not specifically approve
capital purchases other than major projects which are specifically funded. IWK
staff informed us that for 2002-03, $880,000 of $126.6 million in total Health
Centre revenues (which includes DOH and other sources) was allocated to capital
purchases.
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8.30
The Department of Health also has a separate process for DHAs and the IWK to
apply for urgent capital requests during the year. This is not part of the annual
budget process and is reviewed on a per request basis. The Health Centre received
$1 million in funding under this process in 2002-03.
8.31
Board involvement - The Board receives the Center-wide business plan which
includes the service plans and operating budget for the program areas. Senior
management is responsible for completing the business planning process. The
Board receives information on Center-wide business planning activities, funding
requirements and discussions between DOH and the IWK to finalize the budget.
8.32
Monitoring and forecasting - The Health Centre distributes monthly financial
reports to staff with budget responsibilities. These reports are more detailed at
the cost centre level and are summarized for the care team and program levels.
Monthly financial statements and a cash flow projection are also forwarded to the
Board of Directors for information. Staff, management and the Board are satisfied
with information received and believe the information is provided on a timely
basis.
8.33
There is a formal quarterly variance review process which starts at the end of the
first quarter. Program staff provide variance explanations to respective program
directors as well as the budget control officer. The budget control officer produces
a variance analysis for the Health Centre from the program information. Finance
staff informed us that all variances in excess of $1,000 require explanation. We
suggested that this limit and other relevant expectations be documented in a policy
and communicated to staff.
8.34
During the 2002-03 budget process, the Health Centre identified specific
reductions for DOH to help achieve the Centre’s budget targets. All cost savings
initiatives, with the exception of shared laundry services, were allocated to
program budgets. These initiatives were then monitored through the Health
Centre’s regular process which compares cost centre expenditures to budget.
However, the results of specific savings initiatives were not monitored, compared
to projections and reported. As a result management has not reported whether
projected savings were achieved and neither the Department of Health nor the
Health Centre has the necessary information to monitor the success of these
specific reduction initiatives.
Recommendation 8.5
We recommend that management monitor and report during the year on specific savings
initiatives approved during the Business Planning process.
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N e w Parking, Retail and Re search Facility
8.35
The IWK is constructing a $16 million parking, retail and research facility. An
external consultant was engaged to study the traffic/parking demand and conduct
an internal staff survey dealing with support or utilization of the retail facilities.
A cash flow projection was completed, utilizing information from the two
studies mentioned above, and reflects a positive net cash inflow of approximately
$100,000 per annum flowing from the project. The business case was reviewed
and challenged internally and also reviewed by the Departments of Health and
Finance. The financial planning, review and challenge appear adequate. However,
these are forecasts and if the forecast is not achieved, then debt servicing costs will
have to be funded from general revenue, ultimately by the Province.
8.36
In January 2003, the Health Centre received Order in Council approval to borrow
$16 million through the Municipal Finance Corporation to fund the project.
Section 33 of the Health Authorities Act and section 59C of the Provincial Finance
Act require government approval for borrowing transactions. In October 2003,
a new Order in Council was approved which authorizes the Minister of Finance
to loan up to $16 million to the IWK for the project for a term not to exceed
20 years. The Department of Health indicated that the source of financing
was changed after discussions with the Municipal Finance Corporation and the
Department of Finance. The Health Centre acquired the land for this facility from
the Halifax Regional Municipality at a cost of $700,000. Section 30 of the Health
Authorities Act requires that capital expenditures be included in the approved
Health Services Business Plan or have prior written approval of the Minister. This
transaction was not included in the Health Centre’s business plan and Ministerial
approval was not obtained. However, DOH funded the land purchase which
implies approval.
S y s t e ms for Collection of CIHI Data
8.37
Background - The Canadian Institute for Health Information (CIHI) is a notfor-profit corporation that provides health information. All of Nova Scotia’s
publicly-funded acute care facilities are required by way of a provincial/territorial
bilateral agreement to submit health data to CIHI. This data is then used by CIHI
to develop and maintain national health information standards, databases and
registries.
8.38
On September 30, 2002 the Department of Health released a report on the
Province’s health indicators to fulfil a commitment by all provincial jurisdictions
and the Federal government to issue reports on comparable health indicators.
This document was titled Reporting to Nova Scotians on Comparable Health and Health
System Indicators: Technical Report and we provided an audit opinion on the accuracy
of data and adequacy of disclosure. However, we could not provide assurance
on reported indicators originating from CIHI’s Discharge Abstract/Hospital
Morbidity Database due to a lack of documentation of CIHI quality assurance
processes at the national level. Since the data in the Discharge Abstract/Hospital
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Morbidity database originates from hospital patient records which are extracted
and submitted to CIHI by individual hospitals, we decided to examine the controls
over this process at the IWK Health Centre. Our objective was to review the
controls and quality assurance processes in place at the entity level over data
collected and submitted to CIHI.
8.39
Edit checks on CIHI data - The IWK is required to send abstracted data to CIHI
monthly. Our testing of the IWK’s various edit checks over the abstraction process
revealed that improvements are required. The IWK’s coding software permits
patient files to be processed even if certain mandatory fields are left empty. This
deficiency in the software increases the potential for the IWK to send incomplete
health information to CIHI.
8.40
All abstracted data is edited by the Health Centre before and after submission to
CIHI. The editing of health information involves running various computerized
tests on the abstracted data both at the Health Centre and CIHI level. The IWK is
responsible to amend all abstracted information identified by CIHI to be incorrect.
The Health Centre does not reconcile data corrections to original CIHI edit reports.
As a result, the IWK cannot be sure that all errors are corrected before data is
submitted to CIHI for final processing.
Recommendation 8.6
We recommend that the Health Centre, in conjunction with the facility’s supplier of abstraction
software, make necessary changes to assure that all mandatory fields must be completed
before data can be submitted to CIHI. Also, all error reports received from CIHI should be
retained and a process implemented to ensure all corrections are made.
8.41
The Department of Health and its counterparts in other provinces have recently
become aware of problems in the comparability of CIHI data among jurisdictions
due primarily to system changes at CIHI. This has impacted the availability of
benchmarking data for the IWK, District Health Authorities and acute care facilities
in other provinces. The provincial Departments of Health and CIHI are working
towards finding a solution to the identified problems.
S y s t e ms for the Collection of Radiology Billing Information
132
8.42
During the current year, we conducted a separate audit of payments to physicians
(see Chapter 10 of this Report) and noted that radiology and pathology claims
by physicians are billed differently from traditional fee-for-service claims. Most
physicians paid under a fee-for-service payment scheme submit a separate claim
for each patient. Radiology and pathology billings consist of paper reports
showing totals by procedure only with no patient specific information.
8.43
During our audit of the Health Centre, we examined procedures surrounding
radiology billings. IWK radiologists are compensated on an alternate funding
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basis. Under this method of compensation, physicians are paid a contract
amount by Atlantic Blue Cross Care (ABCC - contracted by DOH to process and
pay physician fee-for-service claims and alternate funding payments). These
physicians must still submit shadow billing information to ABCC. The shadow
billing information allows the Province to monitor activity levels and the cost
effectiveness of alternate funding arrangements by illustrating what a physician
would have been paid under the fee-for-service system.
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8.44
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Although responsibility for the accuracy of the shadow billing information rests
with the physician group, the information is taken from the Health Centre’s
Meditech system. During the course of our audit, we performed verification
procedures on three radiology claims. We found one claim was overstated
because one procedure had been recorded twice. Our verification shows that
the current method of capturing data for shadow billing can misstate monthly
radiology activity levels. This would not impact the amount paid to the
radiologists at the Health Centre but would affect the accuracy of the statistical
information.
Recommendation 8.7
We recommend that the Health Centre ensure the Meditech system, which is used to support
radiologists’ submissions to the Department of Health, accurately reflects the numbers of
diagnostic procedures performed.
E x t e r nal Audit
8.45
The Health Centre’s annual financial statements are audited by a public accounting
firm. We reviewed the auditor’s working papers for the year ended March 31,
2002. There were no significant findings to report from that audit.
8.46
The auditor was also engaged by the Foundation Board to provide an audit
opinion on the IWK’s use of Foundation grants each year. This type of audit
enhances the Health Centre’s accountability to the Foundation for funds received.
In 2001, the Health Centre decided to pay costs associated with annual audits for
its key volunteer organizations which further enhances accountability for funds.
8.47
Foundation/ Health Centre relationship - The IWK Grace Health Centre Charitable
Foundation, the Halifax Grace Maternity Hospital Foundation and the IWK
Hospital for Children Foundation (referred to collectively as the Foundation) raise
funds and provide grants to the Health Centre. These grants may be for a specific
purpose or more general in nature. In 2000, the Foundation made changes to its
bylaws to ensure it was no longer controlled by the Health Centre. Without these
changes, the Foundation’s financial statements would have had to be consolidated
with those of the Health Centre to comply with generally accepted accounting
principles. The Foundation and the IWK remain related parties. The IWK financial
statements should include certain disclosures including a description of the
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relationship between the Health Centre and the Foundation and any transactions
between the parties during a given fiscal year to demonstrate transparency and
accountability for funds. Currently, the Centre’s financial statements include
insufficient information about the Foundation.
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8.48
We researched practices in other jurisdictions across Canada to determine
how hospital foundations were treated for financial statement purposes. The
most common accounting for foundations involves related party disclosure
in the financial statements. Hospitals in two provinces disclose foundation
assets, revenues and expenses in the notes to the hospital financial statements.
Such disclosure exceeds standard related party requirements. In Nova Scotia,
approximately half of the District Health Authorities and Provincial Health Care
Centres have related party disclosure of foundations. The remaining districts do
not disclose the relationship to foundations in the financial statements.
Recommendation 8.8
We recommend that the IWK disclose its related party relationship with the Foundation,
including transactions between the two entities during the year, in the notes to the Health
Centre’s financial statements.
8.49
Disaster recovery plan - Discussions with the Health Centre’s information
technology staff and review of external auditor’s documents show that the
IWK does not possess a formalized disaster recovery plan. This information
management deficiency is currently being addressed. The Health Centre’s
information technology staff are in the process of developing a formalized
recovery plan.
I n t e r nal Audit
8.50
134
The Health Centre has an internal auditor. The IWK Health Centre and the Cape
Breton Health Care Complex are the only health care organizations in the Province
that possess internal audit functions. Internal audit’s mission at the Health Centre
is “to provide... assurance that operations are functioning with due regard to economy, efficiency, and
effectiveness, and to ensure that controls are in place to protect the assets of the Health Centre.” In
addition to producing reports at the conclusion of audits, the internal auditor
reports monthly to the Vice-President of Operations and Support Services, and
meets with the Chair of the Board’s Audit Committee annually to discuss the
internal audit work conducted throughout the year. The objectivity of the internal
audit function is somewhat impaired because the Vice-President of Operations and
Support Services, who is responsible for many of the areas audited, approves the
upcoming year’s audits. We believe it would be better for the internal auditor to
report directly to the CEO, and Health Centre management agree.
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8.51
Internal audits are selected on the basis of an analysis of the Health Centre’s
risk of loss. A review of IWK internal audit files and schedules show that the
internal audit function is providing management with valuable control assurance
in the areas audited which include travel expense claims, a personal loan to a
physician, accounts receivable collection, cash collections and controls over
computer equipment. However, there is no strategic direction for internal audit.
Management recognizes that longer-term planning for internal audit is required.
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A c c r e ditation Review
8.52
The Canadian Council on Health Services Accreditation (CCHSA) conducts an
accreditation review on the IWK Health Centre every three years. The IWK
received an unqualified accreditation in 2002 which is the highest level of
accreditation. However, the Report to the Health Centre specified four risk areas
as listed in Exhibit 8.1.
8.53
One of the risk areas noted related to the manner in which drugs are distributed
in the Health Centre. There are basically two drug distribution systems in
use in Canadian hospitals – a unit dose system where all drugs are obtained
from a pharmacist as required, and a ward stock system where hospital wards
maintain a stock of many drugs which are dispensed by nurses upon receipt
of a prescription from a physician. The ward stock system has a higher risk of
medication errors due to such factors as lack of pharmacist review of patient
charts for drug interactions prior to dispensing drugs to patients, and the potential
for non-pharmacist staff on the wards to select the wrong drug or dosage. We
discussed this finding with pharmacists at the Department of Health and reviewed
a published report on pharmacy issues in Canadian hospitals which included
comparative statistics (2001/2002 Annual Report: Hospital Pharmacy in Canada Survey Medication Incidents, Eli Lilly Canada Inc.).
8.54
Although some medications at the Centre are distributed on a unit dose basis,
the Health Centre uses ward stock to a greater extent than its counterparts and
therefore has a higher risk of medication errors. Health Centre staff informed
us they plan to move to centralized IV admixture (CIVA) - where intravenous
medications are mixed in the pharmacy - in 2004-05, with the move to unit dose
for solid dosage forms in 2005-10. Ideally, a unit dose system would require
staffing the pharmacy on a twenty-four hour a day basis so that a pharmacist
would always be available to issue medication. The pharmacy is currently staffed
76 hours per week. The Health Centre plans to move to 105 hours per week,
which would still require the maintenance of some ward stock.
Recommendation 8.9
We recommend that the Health Centre analyze the risks, costs and benefits associated with
drug distribution systems and consider whether it would be appropriate to move to a unit dose
system on a more timely basis
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HEALTH
P r o c u rement
HEALTH
8.55
Background - The Purchasing Department of the IWK Grace is responsible for
the purchase of capital items, goods and services for the effective and economical
operation of the hospital.
8.56
The Department has established relationships with several buying groups in an
effort to reduce costs. It is a member of a National Medical Supplies Buying
Group, a member of a Food Buying Group and a member of the Provincial Drug
Distribution Plan. These groups follow a tendering process to ensure that the IWK
achieves competitive and advantageous pricing on the products supplied
8.57
Compliance - The government’s procurement policy for the hospital sector
requires sole sourced, alternative procurement transactions or tenders awarded to
other than the lowest bidder to be supported by a report called the Non Public Tender
Report. The Report is expected to be maintained by the entity for audit purposes.
Our testing has indicated that this Report is not completed by the IWK Health
Centre. Our audit testing also revealed that in 2 of 15 (13%) of our sample items
tested, there was no public advertisement for items that should be tendered under
the policy for the hospital sector.
8.58
Internal policy - The Health Centre’s written internal policies have not been
updated since 1997, are not clearly defined and do not comply with current
government requirements for the Academic, Schools, Hospitals (ASH) Sector.
Dollar value thresholds for the invitational and public tender processes have not
been clarified. The policy seems to focus solely on capital acquisitions rather
than goods and services. As well, the policy provides no guidelines regarding the
processes required for paying contracted employees. As a result, individuals are
not aware of the current purchasing requirements. Our testing indicated that one
Health Centre department used its own discretion when determining whether to
tender construction contracts.
Recommendation 8.10
We recommend that the Health Centre update its internal procurement policies to comply with
the Government’s requirements for the ASH sector and clarify internal instructions to ensure
compliance with policies.
8.59
136
Documentation - Evidence from sample testing indicates that 5 of 57 (9%) of
purchase orders were created by the Purchasing Department without formal
approval of the purchase requisition by the purchasing manager. In addition, the
system does not generate a log of price changes. As a result, changes to negotiated
prices can be processed by individual buyers without the knowledge or approval
of the purchasing manager.
Report of the Auditor General • • • 2003
IWK Health Centre
HEALTH
Recommendation 8.11
HEALTH
We recommend
- formal approval of all purchase requisitions by the purchasing manager; and
- production and review of price change exception reports to ensure that all price changes
have been approved.
P h a r m acy Inventory Controls
8.60
Overview - At the time of our 1993 audit, the pharmacy department did not have
a perpetual inventory system. A system was subsequently implemented. Currently
the pharmacy department has 36 employees including a director and 17.5 staff
pharmacists (full-time equivalents).
8.61
Segregation of duties - The Health Centre operates a computerized perpetual
inventory system for pharmacy inventory. We reviewed controls over certain
aspects of the system including the risk of undetected loss of drugs before they
are entered into the inventory system. We found some control weaknesses which
management attributed to the small numbers of pharmacy staff. Adjustments
to reconcile the perpetual inventory are not reviewed by senior financial
management. In many cases, physical access to the goods and recording of the
goods in the system is performed by the same individual. IWK staff informed
us that appropriate segregation of duties is not practical given the low numbers
of staff, perishable inventory and the need to maintain the primary emphasis
on patient care. Staff also noted that workload activities and individual
responsibilities will change when a unit dose system is implemented (see
paragraph 8.54 above).
Recommendation 8.12
We recommend the Health Centre
- review the segregation of duties among staff with pharmacy inventory responsibilities
with a view towards improving internal controls;
- ensure that there is appropriate segregation of incompatible duties such as receipt of
goods and maintenance of accounting records; and
- ensure that senior financial management reviews adjustments to perpetual inventory.
E c o n o my and Efficiency: Follow Up to 1993 Audit
8.62
During our audit of the children’s facility in 1993, we reviewed utilization of
resources in the following areas: length of stay; diagnostic imaging; surgical wait
lists; rental of office space to physicians; and the patient information system. Our
1993 recommendations for improvement were followed up during this audit.
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HEALTH
8.63
Setting targets and monitoring performance - As part of this audit, we examined
the Health Centre’s monitoring of whether resources are utilized with due regard
for economy and efficiency and whether there are systems in place to provide
adequate information to support such monitoring.
8.64
The Health Centre produces quarterly report cards for each program area which
include various indicators, including length of stay (LOS). These report cards
compare LOS to the prior year. The IWK does not have established targets or
benchmarks for LOS. There is no comparison outside the Health Centre for the
women’s portion of the facility.
8.65
The Health Centre participates in a group - Pediatrics Decision Support Network
- which produces an annual report comparing LOS for various case mix groups
at six Canadian pediatric facilities (including IWK). Staff at the IWK informed
us they follow up areas where the IWK has the highest LOS. This is an informal
process which is not well documented. We acknowledge that there are difficulties
when comparing LOS between facilities. However, it is still important to try and
find benchmarks against which to measure one’s progress and to formally follow
up and document areas where the Health Centre’s LOS is higher.
8.66
The Canadian Institute for Health Information (CIHI) has established guidelines
for health care facilities which state the time required for particular diagnostic
imaging procedures. Staff at the IWK informed us they use their own estimate
of exam times for certain procedures because CIHI times are based on an adult
population and are not always applicable to pediatrics. The monthly reports
produced in diagnostic imaging do not compare the actual exam time to either
CIHI guidelines or the IWK’s own suggested times.
8.67
The Health Centre has an internal standard of a 72 hour turnaround from the
time of a visit to when a report is received in the physician’s office. In the past,
the IWK’s standard was 48 hours but this was increased in 2000 due to budget
reductions.
Recommendation 8.13
We recommend that the Health Centre continue to work with other facilities across Canada
and organizations such as the Department of Health and the Canadian Institute for Health
Information to further develop targets, monitor performance and make comparisons between
facilities.
8.68
138
Operating room bookings/surgical wait lists - The system for booking operating
rooms has improved since our last audit. Physicians are required to submit
information on patients waiting for surgical procedures to the IWK to ensure
surgical wait lists are complete. The Health Centre uses a computerized system
to accumulate wait list information and schedules operating rooms three to six
months in advance based on an OR Booking Policy.
Report of the Auditor General • • • 2003
IWK Health Centre
HEALTH
HEALTH
8.69
There are no established targets for surgical wait lists or comparisons to similar
facilities across Canada. The OR Committees review a quarterly wait list report
and information on wait lists by doctor is available if required. Based on this
review, the Committee may decide to reallocate time between physicians or
disciplines to try and better manage surgical wait lists.
8.70
The Canadian Institute for Health Information (CIHI) produced a report titled
Health Care in Canada 2002 which noted the difficulties hospitals experience in getting
good information on wait times. Clearly, wait times are an issue which hospitals
and Departments of Health across Canada need to continue to address.
8.71
Patient information system - During our 1993 audit, we noted that private
patients, seen in physicians’ offices, were not always registered on the hospital’s
patient information system. Staff at the Health Centre informed us that all patients
are now registered. Various reports are produced by the system and forwarded to
staff to verify that all patients are recorded. These reports help ensure the accuracy
of the system.
8.72
Rental of office space to physicians - Most of the physicians who work with the
Health Centre have signed alternate funding contracts with the Department of
Health. These contracts require the Health Centre to provide office space at no
cost to the physicians. There are 25 obstetricians/gynecologists who are paid on a
fee-for-service basis. This group of physicians has an arrangement with the Health
Centre whereby they do not have to pay rental fees for office space at the IWK.
There are also six doctors from other specialties who are paid under fee-for-service
arrangements and are required to pay a nominal rent for office space. Monthly
rental fees are below market prices for office space with approximately $5,000 in
total annual revenues from all physician office rental at the Health Centre.
HEALTH
C O N C LUSION
8.73
The IWK Health Centre’s Board and management have established reasonable
systems for planning, monitoring and controlling operations. We have made
recommendations for improvement in certain areas and will follow up on
implementation in three years. Our recommendations include the need for costsavings initiatives identified during the business planning process to be more
clearly reflected in operational plans. We also recommend improvements to the
process for monitoring results of such initiatives.
8.74
Economic and efficient management of a complex health services organization like
the IWK Health Centre requires careful setting of targets, and monitoring of the
level of achievement to determine required improvements. Although the Health
Centre has made progress in this area, particularly in comparing itself with similar
facilities, it is essential that the Centre continue to work with its peers and the
Department of Health to further develop related standards (such as acceptable wait
times) and monitoring practices in all areas of the Centre’s operations.
IWK Health Centre
Report of the Auditor General • • • 2003
139
Exhibit 8.1
Extract from Canadian Council on Health Services Accreditation’s
May 2002 Accreditation Report (page 11)
Current Risk Areas
Encourage early implementation of master plan to relieve space and functional issues, particularly in mental
health care area. There is a lack of exercise facilities for adolescents and the sight lines from nursing station
limit staff’s ability to monitor patient activity.
Drug distribution system still based totally on ward stock, with intravenous infusions being mixed on the nursing
units; inappropriate storage of some high-risk drugs such as KCL. This was discussed with leadership and there
is a good program to manage risk with the current system. It is likely that the centre will move to this system
during the next expansion and this is strongly supported.
Staff and patient identification (many staff not wearing name tags, none available for patients)
Improvements to the way ethical issues are handled could be made in some cases. Although most teams
praised the structures and processes, the neuro-developmental team felt that it was too slow because access
to the appropriate individuals was sometimes difficult.
140
Report of the Auditor General • • • 2003
IWK Health Centre
IWK HEALTH
CENTRE’S
RESPONSE
IWK HEALTH CENTRE’S
RESPONSE
Senior staff of the IWK Health Centre have
reviewed the 2003 Audit report and are
generally supportive of the findings and
recommendations made in the report. We
are pleased by the thoroughness of the
Auditor General’s report and look forward
to making further improvement in processes
noted.
of Health funding. The IWK Health
Centre began the 2003/04 fiscal year
with no accumulated operating deficit.
§
we welcomed the acknowledgment
by the Auditor General Report that
our most recent accreditation (2002)
was unqualified. With reference to
the concerns over the system for drug
distribution, we have had further
discussion with the Department of
Health and submitted a service proposal
for consideration as part of the 2004/
05 business planning process.
§
we agree with the observation that a
note to the Health Centre’s financial
statements could improve the
understanding of the use of Foundation
funds to support the activities of the
Health Centre.
§
we are pleased by the
acknowledgment that we have and
continue to make progress in areas
of performance improvement and in
particular our work with the facilities
across the country.
The following comments are made specific
to Section 7 “Principal Observations from
this Audit”
§
§
we agree with your assessment
of the use of the Carver Model of
Board Governance and in particular
the Board’s deep commitment to
governance.
we are pleased by your
acknowledgment that the Health Centre
has a well established process for
business planning.
§
we acknowledge the need to develop a
more comprehensive documentation of
operational plans to achieve savings and
are committed to initiate this on a go
forward business planning basis.
§
the Health Centre’s final fiscal year
position as of March 31, 2003 was
reconciled with additional Department
IWK Health Centre
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